Paraguay’s soy boom: a blessing or a curse?

Paraguay’s is not often highlighted for its economic achievements. Yet after 20 years of stagnation at the end of the 20th century, the landlocked country has enjoyed almost a decade of economic growth, and in 2010, GDP expanded by 15%, the fastest rate in Latin America.

by Guillermo D’Angelo @argentinaindependent.com

Driving this impressive expansion is a thriving agricultural sector, and its principal product: soybean. Taking advantage of recent rises international prices, spurred by demand from China and the purchase from EU countries to produce biodiesel, Paraguay is now the world’s sixth largest producer and fourth largest exporter of soybean. Given the country’s relative size compared to the top three exporters—US, Brazil, and Argentina—it is fair to say that nowhere is the local impact of soybean so significant.

However, while the soybean boom has created some historic opportunities, it is also today at the heart of the country’s most difficult challenges.

Countryside Changes

Paraguayan life has always been linked to the rural world. Even during Pre-columbian times, the indigenous Guaraní culture was a rural one, developing their civilisation in the subtropical woodlands and leaving no heritage of urban life.

During the colonial era, a vast majority of the Province´s population was rural, with Asunción, the capital of modern Paraguay, the only important urban centre. Things were slow to change after independence and according to the 1982 census, 52.7% of the population was still rural.

This figure has since declined, according to more recent census, to 49.7% in 1992 and 43.3% in 2002; a fall that seems to coincide with profound changes that have been taking place in the Paraguayan agricultural sector since the 1970s.

Until the 1970s, rural production in Paraguay relied on a few key products such as cotton, tobacco, wood, yerba mate and cattle. While the exploitation of wood and cattle was typically performed in big private properties, the growth of cotton and tobacco was largely developed in small lots by local farmers.

In the 1970s, and in close relationship to the country’s first soybean boom, Paraguay’s agricultural landscape began to change in a drastic way. Since that decade, millions of hectares of subtropical woodlands in Eastern Paraguay have been cleared to grow soybean. At the same time, the expansion of the agricultural frontier brought big changes in land ownership, which became much more concentrated, especially in the Eastern departments of Alto Paraná and Canindeyú, where thousands of Brazilian settlers arrived with the necessary funds and means to set up the large-scale farms.

In this new pattern of agricultural production, small farmers and landowners, mainly Paraguayan nationals who did not have the personal capital or state support necessary for mass soybean production, were gradually displaced. They went in high figures to the outskirts of the main cities, becoming the dwellers of rapidly-growing slums. Others remained in the countryside, forming an active landless peasant movement, and gaining increased participation in political life.

One Man´s Meat is Another Man´s Poison

Today, there is an increasing debate within the Paraguayan society about the pros and cons of soybean production. Those in favour of the sector claim that revenues for soybean exports provide a unique opportunity for Paraguay to start a development process that has been long postponed. They show a handful of impressive figures which show the pace of growth in agricultural production and exports and its impact on the most important sectors of the national economy, especially in the building, commercial and financial sectors. Indeed, during 2010, the activity in the building sector grew by 13% while the commercial and services sector grew by 9%.

Alongside cattle rearing, another booming sector due to international demand, the soybean industry accounted for accounted for 55.3% of Paraguayan exports in 2010. According to the Central Bank of Paraguay, of exports totaling US$4.53bn in 2010, the exports of soybean reached US$1.59bn and those ones of meat peaked US$920million.

The contribution of soybean to the economic recovery of Paraguay has been undeniable. The country´s economic performance during the last ten years has been far better than that one during a great part of the 1980s and the 1990s. At the same time, soybean production has helped the international insertion of some economic sectors and has boosted the appearance of a modern service sector related mostly to this boom (banking, communications and construction).

On the other hand, however impressive the growth figures are, soybean has also caused very deep changes in both the economic and social structure of the country, and not necessarily in a positive aspect.

Critics of the present model of soybean farming claim that such a boom may be a house built on sand as Paraguay has become so reliant basically on two products: soybean and meat, and therefore vulnerable to changing climate conditions, volatile international prices and the outbreak of foot and mouth disease (FMD). In the case of FMD, some economic analysts estimate that the country could lose between US$1bn and US$2bn in 2012 due to the closing of some export markets for the Paraguayan meat.

Moreover, the expansion of soybean production has brought as a consequence dramatic environmental damage due to intense deforestation, the astonishing increase in the use of chemical and fertilizers, which have been poisoning the land, the water and the surrounding land of small farmers with the subsequent health problems of the affected communities.

Indeed, these local communities have been most affected by the changes brought by the soybean boom, and are among the biggest critics of the current model of farming. For them, a decade of economic growth has come without social development, as the widening of the agricultural frontier forced many Paraguayan farmers to sell their land. Meanwhile, much of the richest soil fields of Alto Paraná and Canindeyú (near the frontier with Brazil) became the property of Brazilian owners and their descendants, leading to the term Brasiguayos in local slang.

Part of this lack of development is due to the fact that a high percentage of soybean production is exported just as beans, with no added value. Figures are impressive: according to CAPECO, the Paraguayan Chamber of Cereals and Oilseeds Exporters and Traders, of the 7.4million tons of soybean harvested in 2010, 5.7million tons were exported as beans, while only 1.5million tons were industrialised and 221,906 tons used as seeds.

Soybean Production Grows…and so do Conflicts

Many of the displaced farmers have organized themselves in social grass root movements such as Mesa Coordinadora Nacional de Organizaciones Campesinas (MCNOC), Movimiento Campesino Paraguayo (MCP), Movimiento Agrario Popular (MAP) and Organización Campesina del Norte (OCN). At first, they started to claim for land ownership on huge unproductive estates (latifundios) in the San Pedro and Concepción Departments. But since then, they set their eyes on the rich farms alongside the Paraná River bank, saying that much of that land was acquired by the ‘Brasiguayos’ in an illegal way: either by forcing locals to sell their land (by extortion or pressure) or by occupying the land that once belonged to the national state, which was later illegally transferred to the foreigners.

This explains a great part of the current conflict in the Ñacunday region in Alto Paraná, where carperos (landless peasants living in tents) just outside the farm of Tranquilo Favero (a powerful, originally Brazilian landowner, who became a naturalized Paraguayan 25 years ago) have been threatening to invade the land if the illegal acquisition is proved to be true. The unrest in the countryside is growing quickly and threatens to spread to the northern part of Itapúa Department. Itapúa and Alto Paraná are the two richest departments of Paraguay and the epicenter of soybean production.

The issue is becoming more controversial as days pass by. Besides the current tension, natural in a situation where landless peasants threaten to invade property and landowners are claiming their right to defense, there is an escalating verbal war. For instance, in an interview for Folha de Sao Paulo, Favero said that peasants should be given a beating “as a criminal´s woman” and defended Alfredo Stroessner´s dictatorship (1954 – 1989), claiming that the country was a safer place during those years.

These words caused great criticism from the media, the political parties, and feminist and campesino organisations. The Municipal Council of Asunción unanimously declared Favero persona non grata and there were some attempts from some political parties in the council to spur a proposal to deprive him of his Paraguayan citizenship.

There is even some concern that the conflict between Paraguayan campesinos and Brasiguayos landowners could also create a difficult international panorama for the country as the Brazilian government is carefully observing what is happening on the other side of the frontier. There is no doubt that the issue of the ‘Brasiguayos’ and the land ownership conflict are currently in the agenda of both the Brazilian government and media.

Another Question?

While the majority in Paraguay are still trying to answer if soybean is a blessing or a curse for them, there is a new question arising out of this problem: Whither Paraguay? It is a question that comes to mind due to increasing tensions, deteriorating social conditions, and most serious of all, the lack of willingness in many of the involved actors to tackle these long-standing problems in a legitimate way.

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